On March 21, 2001, Standard&Poor's revised the outlook on Iceland's ratings from positive to stable. The outlook revision reflects growing external imbalances, which have led to a rapid increase in the level of external indebtedness to 265% of exports in 2000. The current account deficit reached 10% of GDP in 2000 and this has been compounded by net foreign direct investment (FDI) outflows of 2% of GDP and negative portfolio flows caused by international diversification of Icelandic private pension funds. Standard&Poor's expects the economy's growth rate to slow to 1.7%, which is likely to reduce the current account deficit to a still-high level of about 7% of GDP. External borrowing has been channeled principally through the
